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State-Run Investment Funds: Major Institutional Investors on Global Financial Markets

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  • Petr Sedláček

Abstract

The article provides a basic description and taxonomy of sovereign wealth funds, rapidly gaining importance in the international monetary and financial systems. SFWs are pools of assets owned and managed directly or indirectly by governments to achieve specific objectives. Tentative estimates of foreign assets held by SWFs are between USD 1.9 trillion and USD 2.9 trillion. These amounts are about 10 times less than the assets under management of mature market institutional investors and modestly higher than those managed by hedge funds. Current IMF projections are that sovereign wealth funds will accumulate international assets under sovereign management up to about USD 12 trillion by 2012, but growth estimates are different. The author´s estimate of the SWFs´ growth by 2013 is between USD 3.9-5.4 trillion. These funds have raised concerns about financial stability, corporate governance and political interference and protectionism. The following analysis does not prove the negative distortions of these funds on global financial stability and capital flows. In response to these concerns, the IMF with SWFs have made public voluntary Generally Accepted Principles and Practices (GAPP) for SWF, and the OECD has published guidance on recepient country policies towards the SWFs. Recipient countries should strive to avoid protectionism and should uphold fair and transparent investment frameworks.

Suggested Citation

  • Petr Sedláček, 2010. "State-Run Investment Funds: Major Institutional Investors on Global Financial Markets," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2010(2), pages 3-22.
    • Handle: RePEc:prg:jnlaop:v:2010:y:2010:i:2:id:297:p:3-22
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    References listed on IDEAS

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    1. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    2. Roland Beck & Michael Fidora, 2008. "The impact of sovereign wealth funds on global financial markets," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(6), pages 349-358, November.
    3. Fidora, Michael & Beck, Roland, 2008. "The impact of sovereign wealth funds on global financial markets," Occasional Paper Series 91, European Central Bank.
    4. Aaditya Mattoo & Arvind Subramanian, 2009. "Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization," The World Economy, Wiley Blackwell, vol. 32(8), pages 1135-1164, August.
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    More about this item

    Keywords

    Sovereign Wealth Funds; Generally Accepted Principles and Practices (GAAP); OECD Instruments;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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